airberlin announced a
strategic review of its long-term business model as it reported its 2013 annual
financial results. The predominant objective will be to restructure the airline
and shape a robust business model that is fit for purpose in today’s
competitive market conditions. For this purpose airberlin will strengthen its
management board with the appointment of a Chief Restructuring Officer.

In support of this
restructuring, Etihad Airways will subscribe to a €300 million eight per cent
perpetual subordinated cumulative convertible guaranteed bond. This will form
part of a recapitalisation which is intended to strengthen and assist in the
reorganisation of airberlin’s capital structure and secure the improved
long-term prospects for the business and its stakeholders. Etihad Airways’
stake in airberlin will remain unchanged at 29.21 per cent. airberlin will issue
a further bond of a minimum of €150
million for general corporate financing purposes.

James Hogan, President
and Chief Executive Officer of Etihad Airways, reaffirmed that Etihad Airways
was a strategic minority investor in airberlin, and remained confident and
committed for the long term.

He said: “The airline
is clearly in a very challenging position.
However, we are confident the business is moving in the right direction,
and can be turned around but it needs an accelerated and fundamental
restructuring. airberlin has our full
support in this process.

“We’re here for the
long term - for the airline, the travelling public and the community. With the right strategic vision, and the
right implementation, Etihad Airways believes airberlin can become a
sustainably profitable business, securing the jobs of its 8,900 employees and
the many thousands more workers it indirectly supports.”

Explaining the merits
of Etihad Airways’ equity investment strategy in Germany, Mr Hogan said: “This
partnership has very clear benefits for Etihad Airways too. When we embarked on
our partnership with airberlin in 2011 our access into the tightly restricted
German market was limited. We operated just 25 flights per week to three
destinations.

“In one single
transaction at that time, for less than the cost of a single wide-body
aircraft, Etihad Airways gained access to more than 30 million passengers and a
combined European network of 228 destinations across 84 countries.

“Today the picture is
very different and Germany is at the centre of our European network. Just two
years on, the two airlines now operate 56 weekly flights and, in 2013,
delivered more than 560,000 passengers onto each other’s networks. This is an
increase of 75.3 per cent on 2012, generating more than €200 million in new
revenues.

“The cumulative total
of codeshare passengers since our partnership with airberlin began is now
approaching one million, and Germany has overtaken the United Kingdom as Etihad
Airways’ largest outbound European market. airberlin is the biggest contributor
of passengers to Etihad Airways’ global network.”

Both airlines’
passenger numbers are expected to grow further as Etihad Airways’ equity
alliance partners, such as Air Serbia and Etihad Regional, and airberlin’s
broad range of commercial partners extend codesharing to airberlin’s route
network.

The benefits of this
equity partnership extend beyond network access. Leveraging economies of scale
and collective purchasing power, the cost synergies came through joint
procurement initiatives in aircraft, engines, maintenance, catering and
technology.

The successful
contribution came despite very challenging market conditions for airberlin,
which reported operating losses for the year ended at 31 December 2013 of
-€231.9 million.

The German carrier was
successful in reaching its €200 million cost reduction and revenue contribution
target for the year, achieving key elements of its ‘Turbine’ turnaround program
and reducing available seat kilometres, a key measure of capacity, by 5.1 per
cent. Business and cost synergies achieved with Etihad Airways played an
important part in these savings.

However, airberlin reported an unusually sluggish
outbound summer season due to the hot weather, followed by the traditionally
difficult winter quarter. This was compounded by increased competition and on-going
weakness in the European economies.